Rates applicable to Loaned Securities and Cash Collateral - GMSLA Provision

From The Jolly Contrarian
Jump to navigation Jump to search

2010 Global Master Securities Lending Agreement
A Jolly Contrarian owner’s manual

Clause 7 in a Nutshell
Use at your own risk, campers!

7. Rates applicable to Loaned Securities and Cash Collateral
7.1 Rates in respect of Loaned Securities: Borrower must pay to Lender, a sum determined by multiplying the agreed rate to the daily Market Value of the Loaned Securities.
7.2. Rates in respect of Cash Collateral: Where Lender holds Cash Collateral for any Loan, it must pay to Borrower, sum determined by multiplying the agreed rate to the amount of such Cash Collateral. The parties may set off amounts due under paragraphs 7.1 and 7.2.
7.3 Payment of rates: Payment amounts due under this paragraph accrue daily from (and including) the Settlement Date to (but excluding) of the Business Day on which Equivalent Securities are delivered or Cash Collateral is repaid. Accrued sums for each calendar month are payable in arrears by the tenth Business Day after the end of that calendar month.
view template

Clause 7 in full

7. Rates applicable to Loaned Securities and Cash Collateral
7.1 Rates in respect of Loaned Securities: In respect of each Loan, Borrower shall pay to Lender, in the manner prescribed in sub paragraph 7.3, sums calculated by applying such rate as shall be agreed between the Parties from time to time to the daily Market Value of the Loaned Securities.
7.2. Rates in respect of Cash Collateral: Where Cash Collateral is deposited with Lender in respect of any Loan, Lender shall pay to Borrower, in the manner prescribed in paragraph 7.3, sums calculated by applying such rates as shall be agreed between the Parties from time to time to the amount of such Cash Collateral. Any such payment due to Borrower may be set off against any payment due to Lender pursuant to paragraph 7.1.
7.3 Payment of rates: In respect of each Loan, the payments referred to in paragraph 7.1 and 7.2 shall accrue daily in respect of the period commencing on and inclusive of the Settlement Date and terminating on and exclusive of the Business Day upon which Equivalent Securities are delivered or Cash Collateral is repaid. Unless otherwise agreed, the sums so accruing in respect of each calendar month shall be paid in arrears by the relevant Party not later than the Business Day which is the tenth Business Day after the last Business Day of the calendar month to which such payments relate or such other date as the Parties shall from time to time agree.
view template

Related agreements and comparisons

Related agreements: Click here for the same clause in the 2018 Pledge GMSLA
Comparison: Click to compare the 2010 GMSLA and 2018 Pledge GMSLA versions of this clause.

Resources and navigation

2010 GMSLA: Full wikitext · Nutshell wikitext | GMLSA legal code
Pledge GMSLA: Hard copy (ISLA) · Full wikitext · Nutshell wikitext |
1995 OSLA: Full wikitext · Nutshell wikitext | GMSLA Netting
Let me Google that for you: Guide to equity finance | ISLA’s guide to securities lending for regulators and policy makers
Navigation
2010 GMSLA 1 · 2 · 3 · 4 · 5 · 6 · 7 · 8 · 9 · 10 · 11 · 12 · 13 · 14 · 15 · 16 · 17 · 18 · 19 · 20 · 21 · 22 · 23 · 24 · 25 · 26 · 27 · Schedule · Agency Annex · Addendum for Pooled Principal Agency Loans
2018 Pledge GMSLA 1 · 2 · 3 · 4 · 5 · 6 · 7 · 8 · 9 · 10 · 11 · 12 · 13 · 14 · 15 · 16 · 17 · 18 · 19 · 20 · 21 · 22 · 23 · 24 · 25 · 26 · 27 · 28 · Schedule · Agency Annex

Stock Loan owner’s manuals: GMSLA · Pledge GMSLA · OSLA

Index — Click ᐅ to expand:
GMSLA

Get in touch
Comments? Questions? Suggestions? Requests? Sign up for our newsletter? Questions? We’d love to hear from you.
BREAKING: Get the new weekly newsletter here Old editions here

Content and comparisons

The rate payable on Loaned Securities and, for the 2010 GMSLA only, provision for interest on Cash Collateral. You wouldn’t have cash collateral in a 2018 Pledge GMSLA, the very point of the transaction being to upgrade all those crappy equity securities sitting on your balancesheet that you rehypothecated as collateral for your margin loans and bought as Hedge Positions for your delta-one synthetic equity swaps.

Aside from chopping out that middle paragraph 7.2 relating to Cash Collateral, and some conforming amendments, the 2018 Pledge GMSLA has much the same vibe as the 2010 GMSLA.
Template

Summary

So what’s going on here? Not a lot, though it is fair to say it is fairly fundamental to the economics. You have to pay a rate on the market value of the Loaned Securities on top of any manufactured income (as to that see para 6.2), which is the Lender’s price for getting out of bed, and where you have collateralised with cash, the Lender pays you interest. (Where you have posted non-cash Collateral the Lender manufactures income back to you).

Flannel cracker

There is a sublime drafting gem thrown in, almost as an afterthought, in the run-off grooves of paragraph 7.3.[1] It runs, after a fashion, like so: “Unless otherwise agreed, ... such amounts will be paid on a specified date ... or such other dates as the parties from time to time agree” is one of my favourite flannelesque bookends. It has an arabesque, Möbius, twisting circularity to it that you just can’t teach. This is master craftspersonship. It is an Easter egg for purists.
Template

See also

Template

References

  1. This is Para 7.2 in the 2018 Pledge GMSLA